According to new data released by the Central Bank of Cyprus (CBK) on Tuesday 12th November, the volume of non-performing bank loans (NPLs) in the island nation has fallen slightly.
Specifically, the figure fell to €1.63 billion in August 2024.
In other words, NPLs in the Cypriot banking system have fallen by €15m.
According to the European Banking Authority directive, problem loans include restructured loans that have been treated as non-performing for at least one year.
In turn, loans more than 90 days past due, which do not include restructured facilities, fell to €1.29 billion, or 5.4% of total loans. The MEX coverage ratio was 55.3%, up slightly from 55.2% in the previous month. At the same time, cumulative MEX provisions totalled € 990 million.
Total restructured loans at the end of August amounted to € 1.36 billion, of which € 713 million were still included in non-performing loans. Overdue loans to households fell to €915.7 million from €916.6 million in the previous month, and to enterprises to €682.3 million from €695.7 million.
At the end of August the share of NEDs in total loans remained at 6.8%, the same as in the previous month.
Total restructured allocations of licensed credit institutions at the end of August 2024 amounted to € 1,362 billion, of which € 713 million of allocations are still included in MEX.
As a reminder, problem loans are loans that are more than 90 days past due and classified as unsatisfactory, doubtful and irrecoverable.
Typically, the European Central Bank forces banks that have a lot of bad loans to hold more capital, which ends up slowing the economy as banks have less money to make new loans.
Indeed, non-performing loans are a persistent weakness in the Cypriot banking sector, although the situation is expected to gradually improve. Non-performing loans continue to pose a risk to the stability of the island's financial system and remain the main obstacle to the strengthening of the banking sector.